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Is Malaysia Asia’s Weakest Link?

..the thrust of new report from Sarah Fowler of U.K.-based Oxford Economics, which ranks Malaysia the “riskiest country in Asia of those we consider,” more so than India, Indonesia and even coup-happy Thailand. On the surface, she points out, all’s well: Growth is zooming along at 6.2 percent, the external balance is reasonably sound and political stability reigns. But all’s not what it seems. “Prompted by its high levels of public debt, rising external debt and shrinking current account surplus, there has been a shift in the perception of risks towards Malaysia and away from Indonesia,” Fowler explains.

… But Malaysia‘s current-account surplus is dwindling, from 16 percent of GDP in 2008 to 3.7 percent last year. And household debt is, to use Fowler’s words, “worryingly high” at more than 80 percent of GDP compared to less than 60 percent in 2008.

“A climate of entitlement amongst the Malay community limits entrepreneurialism and vested interests within the United Malays National Organization still resist change,” Fowler argues.

.. Prime Minister Najib Razak’s lackluster party is clinging to power. Meanwhile, opposition leader Anwar Ibrahim may soon be in jail again on sodomy charges many see as politically motivated.

The government’s handling of Malaysian Air Flight 370 said it all. Its deer-in-the-headlights response to the plane’s disappearance was the product of an insular political culture. The trouble is, that insularity is holding back a resource-rich economy that should be among Asia’s superstars, not its weakest links.